Monday 28, February 2022

Wrap

I’ve been away, and much too busy with my day job to think much about what’s happening. We are still in the fog of war, and nobody knows that the outcome will be, but the following things might be worth thinking about:

• Russia is economically puny. It’s only two thirds the size of the UK. Ukraine is way down there between Morocco and Sudan. Whatever happens, it’s hard to see that the global economy will be destabilized, unless there is contagion across the region.

• SWIFT is just a messaging system. Fax machines offer an alternative system. It’s hard to believe that the Russians will not work out how to sell their oil and gas to someone who can pay them in stuff they want.

• Europe has changed its attitude. Germany particularly. It may actually start to behave more like a country, not it perceives a threat from a nuclear-armed near neighbour. Politicians may be forced to not only speak, but act decisively.

• In war, as in pandemics, governments tend to spend, and not dither endlessly worrying about how to reduce the deficit. This is usually good for distribution of income to the strata in society who have a high propensity to consume. This may result in the long-discussed but rarely seen levelling up and economic recovery.

• The visible need to accept Ukrainians as refugees may make aging societies like Britain and Germany be more welcoming to immigration in general, with a possible lift to inflation.

The markets seem to be waiting for some certainty. Predictably, commodities have bounced violently. Coal is up 15%, wheat by 9%. The large violent downward moves of last week will have stopped out a lot of investors. Predictable rally in dollars, and lowering of yields. The general rush to safe assets has continued, but feels as though it’s petering out. This is a day to sit on the sidelines, watching, with a beer in hand.

$IRNT

$IRNT dropped 23% after a White Diamond short-seller report. Good for White Diamond, but with low liquidity most retail investors will not have made money. The guys certainly seem to know what they are talking about, as you can see.

Social Credit and Money

Matt Levine is the most amazingly original thinker. I don’t know how he comes up with his stuff. Even if he was a team of ten, I’d still be impressed. He points out that if you work hard and make stuff that people want, you get money, and that allows you to fly and stuff. Just like China’s Social Credit. He goes on to say that all money is like a social credit, because it relies of tacit acceptance of society to make it function. He made this point in the context of Russia not be able to use its vast store of foreign exchange reserves, because it’s locked out of SWIFT.

Even if it’s not a perfect parallel, it’s very clever.

Read the piecehere.